The favourite financial topic of recent times took another turn this week with multiple facets coming to the fore. Much of the financial press is now talking about the US – China situation in terms of a trade war and it seems that initial pondering as to whether the first round of tariffs was just for show to pump up the Trump base ahead of mid-term elections has given way to the belief that this is real and we are rapidly approaching (if not already in) trade war territory.

President Trump this week announcing that he’s prepared to impose tariffs on every single dollar of goods that hits US shores from China. The recently released list of an additional $200 billion worth of items which the US is currently in consultation regarding takes aim at a lot of different product categories including the recently unearthed and seemingly innocuous sub-heading defined as “data transmission machines” which may affect things such as the Apple (NASDAQ:AAPL 136.76 -0.31%) Watch and FitBit (NYSE:FIT 6.93 -0.86%) trackers.

No Investing in Chinese Firms that Help the PLA, Says White House

The ZTE Issue

However this is seemingly at odds with the Republicans in congress backing away from imposing stiffer measures against ZTE (HKG:0763) at the behest of President Trump and one wonders as to the cause of this seemingly contradictory state of affairs. Democrats have obviously seized on the issue with Senator Chris Van Hollen commenting that:

Despite bipartisan support to put American national security before jobs in China, the Republican leadership refused to take any real, substantive action on ZTE. Instead, they joined President Trump in bowing to Beijing.

It may be that the President feels that with the huge fines ZTE has agreed to pay to the US and the significant shake up of its board and management team, the firm has done enough to deserve another chance but it seems unlikely given the increasingly bitter nature of trade relations between the US and China.

Technology Transfer

One of the main issues at the heart of the dispute is the historical way that China has allowed foreign companies to do business in the country, allowing them in only under onerous joint venture and partnership arrangements which many feel are simply facilitating a few quarters of growth in American company earnings but at the expense of long term competitiveness given China’s stated aim of reducing its reliance on foreign technology as part of the “Made in China 2025” initiative.